MEXICO Law and Practice Contributed by: Luis Álvarez Cervantes, Adolfo Athié Cervantes, Alejandro Barrera, Jesús Colunga, Eduardo Kleinberg, Juan José López de Silanes, Carlos Martínez-Betanzos and Amílcar Peredo, Basham, Ringe y Correa S.C.
• Income, gains, early disposals and capital returns are taxed or deferred for qualifying real estate trusts. • A tax credit will be available to income taxpayers for contributions to domestic film production or distribution projects. The credit equals the contrib - uted amount, up to 10% of the prior year’s income tax. This can be used to offset annual and estimat - ed tax; unused amounts may be carried forward for up to ten years. • A tax incentive for cultural investment projects (the - atrical productions, visual arts, dance, music, and literary works). The tax credit can be used to offset annual and estimated income tax capped at 10% of the prior year’s tax. Unused credit can be carried forward for up to ten years. • Real estate developers can deduct land acquisition costs in the purchase year if 85% of income is from developments. Upon sale, the full value is taxable, plus an additional 3% per elapsed year (inflation- adjusted). If not sold within three years, the updat - ed cost becomes taxable. The rule applies to all current land assets for at least five years. • Venture capital investments in unlisted Mexican companies can receive special tax treatment if made through qualifying Mexican trusts. These trusts must invest at least 80% of assets in the equity or loans of such companies, hold shares for a minimum of two years, distribute at least 80% of annual income within two months after year-end, and meet SAT regulatory requirements. Remain - ing assets must be in low-risk government or debt instruments. • Production co-operatives composed solely of indi - viduals may opt to calculate income tax under indi - vidual rules, with tax payment deferred until profits are distributed. If profits remain undistributed for over two years, tax must be paid. Co-operatives must maintain an updated taxable profit account, invest undistributed profits in employment- or membership-generating assets, and treat yields/ advances to members as employment income. No estimated income tax payments are required. • Taxpayers conducting R&D projects in Mexico may claim a 30% tax credit on incremental annual R&D expenses and investments versus the prior three- year average against income tax.
• Taxpayers may claim a tax credit for contributions to high-performance sports infrastructure and athlete programs in Mexico, capped at 10% of the prior year’s income tax. • Taxpayers can claim a tax credit equal to 30% of investments in publicly accessible, fixed elec - tric vehicle charging equipment, applied against income tax for the year of investment. Unused credits can be carried forward for up to ten years but are lost if not applied in the eligible year. The credit is not to be included as taxable income. • Foreign fiscally transparent entities managing private equity investments in Mexican companies may maintain tax transparency if specific require - ments are met. These include: registering and documenting all members’ tax residency with the SAT, being created in jurisdictions with broad infor - mation exchange agreements with Mexico, ensur - ing members are effective income beneficiaries, and requiring members to report related income. Non-compliance by any member results in loss of transparency proportional to their participation. This applies only to income from interest, divi - dends, capital gains or real estate leases. Fiscal Incentives for Development Poles (PODEBIS) provides for an income tax exemption as follows: 0% ISR for the first three years; 50–90% reduction for the next three years if job creation goals are met. No VAT payable for four years. In addition, 100% immediate deduction of new fixed assets available until 2030; and 25% deduction for training and innovation on the increase in expenses in these areas, also valid until 2030. 5.4 Tax Consolidation As of 2014, the Traditional Tax Consolidation regime disappeared and it was substituted with what it is known as the Optional Regime for Group Companies. Under this regime, losses are not consolidated but rather taxpayers may defer income tax for three years at the most. 5.5 Thin Capitalisation Rules and Other Limitations Interest deductions are limited to net interest exceed - ing three times its adjusted tax profit when annual
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